The Wealthy Rank the Brokerage Industry

Sep 13, 2006 9:40 AM, By John Churchill

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Every brokerage firm is courting wealthy clients, and many of them say that serving the wealthy is what they do best. So just how are these firms doing? A new study based on high-net-worth customer opinions reveals a surprising mix of success and failure at 20 of the most prominent brokerage firms.

Perhaps most surprising is who comes out on top overall: Online brokerage firm TD Waterhouse (now known as TD Ameritrade) beat out full-service powerhouses Smith Barney, UBS, Merrill Lynch and Wachovia, just to name a few, in the overall ranking.

The survey was conducted by the Luxury Institute, an independent research organization that focuses on the high-net-worth consumer and the companies that cater to them. The 2006 Luxury Brand Status Index (LBSI) surveyed 1,000 consumers with a minimum age of 21 and minimum income of $150,000. The average household income for respondents was $616,000 with $3.8 million in net worth. (To link to the Luxury Institute’s Web site, where you can purchase the study, click here.)

Milton Pedraza, CEO of the Luxury Institute, says, “The discount broker/dealers like Schwab and TD are seen as having a more straightforward and more transparent value proposition. The perception is that the interests of the client and broker are more aligned.” Several of the write-in comments to the study reflected this opinion: One respondent said the firm has “low costs, no conflict of interest since no recommendations offered,” another said simply, “cheap prices, solid execution, no thrills, easy to use.”

Respondents were asked to rate on a scale of 0 to 10 just the firms they were familiar with on four different issues: consistently superior quality; unique and exclusive brand; used by people who are admired and respected (which was scored as social status); and the firm’s ability to make the customer feel special across the full customer experience (which was scored as self enhancement). The LBSI was then derived from an average of the four values.